Tesla’s raw material needs, including lithium, are increasing rapidly with its battery production ramp-up at Gigafactory 1 in Nevada to support the Model 3 production and other energy storage projects.

Now we learn that the company is reportedly in talks with SQM, Chile’s largest lithium producer, to secure lithium supply.

Now Eduardo Bitran, the executive vice-president of Chilean development agency Corfo, told the Financial Times (paywall) that Tesla is in talks with SQM and that it could even have plans to build “a processing plant in Chile to produce the high-quality lithium it needs for its batteries.”

The executive added:

“With an increasing supply of lithium, Chile is key for any company that wants to become global in electro-mobility. Being close to Chile or having a strategic alliance in Chile becomes a strategic factor for a company like Tesla.”

Bitran says that the talks are still in early stages, but Tesla has been interested in the lithium developments in Chile for years now.

To date, most of the automaker’s batteries have been coming from Japan with Panasonic handling the supply chain. But now that Gigafactory 1 is in operation in Nevada, Tesla is more involved in the supply chain.

Tesla already signed a conditional supply agreement with Pure Energy Minerals, which has claims on 9,500 acres of lithium brine in Clayton Valley – just a four-hour drive from the Tesla Gigafactory. The company is still far from entering a production phase and therefore, Tesla would need to secure other sources.

Chile is believed to have one of the largest and most accessible reserves of lithium in the world and several mining companies are currently rushing to exploit those resources.